Photo credit: OW Bunker
Update: OW Bunker Files for Bankruptcy
By Libby George
LONDON, Nov 6 (Reuters) – Shipping companies and bunker oil traders scrambled to source fuel and take over supply contracts on Thursday after OW Bunker, one of the world’s biggest shipping fuel firms, said it faces possible bankruptcy after uncovering internal fraud.
Traders said refineries and other shipping fuel suppliers were cutting deliveries and were likely to cancel long-term contracts with the Danish company, which handles around 7 percent of all global bunker fuel supplies.
An OW Bunker spokesman, asked whether the firm had put its activities on hold, said he could not comment further while the in-court restructuring process was ongoing.
RELATED: OW Bunker At Risk of Bankruptcy After Uncovering Fraud
But a source familiar with the matter said OW Bunker was halting the majority of its operations.
“Most activities are put on hold,” the source said.
Niels-Henrik Lindegaard, head of Maersk Oil Trading, which purchases marine fuel for parent company A.P. Moller-Maersk and is among the biggest buyers in the world, said his company was seeking new suppliers.
“In the short term we need to find new suppliers for some of the supplies we have commissioned from OW Bunker,” Lindegaard said.
European market sources said OW Bunker would no longer have access to the physical supplies it has promised its customers.
“All refiners, bunker traders and other suppliers have closed the lines on their volume,” one European bunker supplier said. “It will be a massive mess.”
The company, which handled 29.2 million tonnes of fuel worldwide in 2013, warned investors on Thursday that fraud by unnamed senior employees in its Singapore-based subsidiary had put it at risk of bankruptcy.
Chairman Niels Henrik Jensen told Reuters the company was filing for a court restructuring process.
The company recorded hedging losses of $24.5 million in the third quarter, but said on Thursday that loss would grow to around $150 million.
One European supplier said OW had canceled all its physical purchases, and that refiners and traders who supplied the company were now rushing to redirect those deliveries, offering them to charters and other traders.
Bunker fuel buyers and sellers are now flooding into the spot market, traders said, while rival companies race to snap up OW’s business.
Market sources said shipping companies typically pay the bunker supplier only once the fuel has been delivered — shielding them from some financial loss associated with the possible bankruptcy.
(Additional reporting by Ole Mikkelsen in Copenhagen and David Sheppard in London; Editing by Dale Hudson)
© 2014 Thomson Reuters. All rights reserved.
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